Crises are nothing new for emerging economies, which have repeated the same patterns again and again, with often-devastating results. But have those patterns finally been broken?

Emerging economies have experienced boom-bust cycles in external financing for decades. The boom phase generates current-account, fiscal, and private-sector deficits — outcomes that are compounded by increases in domestic financing. Eventually, however, high debt levels lead to a loss of confidence and sharp cuts in external financing — a so-called sudden stop — producing balance-of-payments, fiscal, and financial crises.